Green crude oil from algae gets a boost

Phillips 66 and green crude oil pioneer Sapphire Energy, Inc., have agreed to work together to develop crude oil derived from algae to the commercial level. The project offers the promise of a renewable form of domestic oil, but development will take decades.

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Algae covers the surface of Corydon Lake in Corydon, Iowa. Algae-based fuels have the potential to displace 17 percent of the oil imported for use in the transportation sector, according to the US Energy Department.

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A deal between refiner Phillips 66 and Sapphire Energy to develop green crude was lauded by advocates as the dawn and the emergence of a new renewable form of domestic oil. With a production target of around 65,000 barrels per day by 2025, however, the celebration may be premature.

Phillips 66 and green crude pioneer Sapphire Energy, Inc., agreed to work together to develop crude oil derived from algae to the commercial level. Both sides said they'd work to expand on Sapphire's test program to show green crude can be refined using traditional methods.

"We’re looking forward to building a strong relationship with Phillips 66, an established leader in research and development for next generation fuels, who understands the opportunity our green crude oil holds as a feasible and sustainable crude oil choice for refiners," she said in a statement.

The U.S. Energy Departmentsaid algae-based fuels have the potential to displace 17 percent of the oil imported for use in the transportation sector and in August, Sapphire secured a $5 million grant from the federal government to help develop the refining process for algae-based fuels.

The Algae Biomass Organization said the deal between Sapphire and Phillips 66 marked a turning point in the effort to find alternatives to conventional crude oil.

"This step is a vital part of introducing a new fuel to market, and Phillips 66’s interest is another sign that algae cultivation technologies are gaining steam," the trade group said.

Sapphire in March secured a deal with a subsidiary of Tesoro Corp. to purchase crude oil from a so-called green crude farm in New Mexico. Tesoro was Sapphire's first commercial customer and should be receiving about 100 barrels of green crude oil by next year.

But green crude is nothing new. Exxon Mobil in 2009 reached an agreement to explore algae-based fuels in a $600 million deal with Synthetic Genomics. Last year, however, Exxon said getting algae to the commercial level was more difficult than expected. (Related article: Research Unlocks Algae Biofuel Potential)

Merl Lindstrom, vice president of technology for Phillips 66, said the deal with Sapphire was the right one to make in order to produce a "refinery-ready" and sustainable alternative for his company. But it's expensive. The same study the Energy Department used to assess the potential for algae-based fuels in the transportation sector also found production requires more water per barrel than petroleum and may cost three times as much.

Algae store natural oils as a source of energy. Used as a fuel source, it's essentially carbon neutral because photosynthetic organisms survive by metabolizing CO2, a greenhouse gas. Developing algae as an alternative could offset climate concerns expressed this year by the international community. Sapphire's effort to make it commercially viable may be notable in terms of the interested generated in green crude but with just 23 million barrels expected by 2025, it falls short of a green revolution.